2012 (2) TMI 236 - AT - Income Tax

Registration under Trust - Object encouraging Religious Discourses - Held That - encouraging religious discourses without mentioning any religion cannot per se be considered as benefiting any particular religious community even if considered as religious in nature it is only a part of many number of object clauses, all of which are charitable and hence cannot be considered as of a nature which is wholly or substantially wholly religious. Whether Fees from Apprentices convert trust into commercial venture - Held That - Fee received from apprentices who were studying in the institution or establishment by the Trust could not be per se be a commercial activity. possibility of a future contingency with a remote probability will not make the Trust itself a commercial venture

Summary

Issues: Denial of registration under Section 12AA of the Income-tax Act, 1961

Analysis:
1. Issue of Religious Nature of Trust's Objects:
The appeal filed by the assessee challenged the denial of registration under Section 12AA of the Act by the ld. DIT(E) based on the objection that one of the object clauses of the Trust mentioned encouraging religious discourses, which was deemed to make the Trust's objects wholly or substantially wholly of a religious nature. The appellant argued that the clause did not specify any religion and, therefore, should not be considered as promoting any particular religion. The Tribunal observed that the clause in question was part of several charitable object clauses and, even if considered religious, it did not make the Trust wholly or substantially wholly religious. The Tribunal held that encouraging religious discourses without specifying any religion did not benefit any particular religious community, and in the context of other charitable objects, it did not render the Trust religious in nature.

2. Issue of Commercial Activity through Collection of Fees:
The ld. DIT(E) also denied registration under Section 12AA on the grounds that the Trust could levy fees on apprentices, which was viewed as a commercial activity. The appellant contended that such fee collection was within the parameters of the object clause and did not convert the Trust into a commercial venture. The Tribunal agreed with the appellant, stating that the trustees' activities were limited to those conducive to the Trust's objects, and collecting fees from apprentices studying at the Trust did not inherently make it a commercial entity. The Tribunal highlighted that the possibility of future contingencies, such as generating substantial surplus, could be addressed during assessment proceedings, and the Act provided for revocation of registration in such cases. Ultimately, the Tribunal found the reasons cited by the ld. DIT(E) for denial of registration unjustified and directed the granting of registration under Section 12AA of the Act to the assessee-Trust.

In conclusion, the Tribunal allowed the appeal filed by the assessee, quashing the order of the ld. DIT(E) and directing the grant of registration under Section 12AA of the Income-tax Act, 1961 to the assessee-Trust. The judgment was pronounced on 6th January 2012.